Tycoon Mary Wambui loses bid to stop Sh9bn Equity hotel takeover

It ruled that the hotel had not disputed the existence of an outstanding debt, which the bank said stood at Sh9.1 billion, and found no evidence that the administrator had disrupted the hotel’s operations since taking office on July 6.

The court also held that Glee Hotel’s offer to deposit Sh400 million pending determination of the bank’s insolvency petition was not proportionate to the debt claimed by the bank.
“All these factors taken together favour not granting any interim orders at this point,” Justice Freda Mugambi said.

“The administrator is an officer of the court, and should it evidently become clear to this court that there is a need to intervene, there are mechanisms under the Insolvency Act to do so.”

The ruling leaves administrator Kamal Anantroy Bhatt in control of the five-star Nairobi hotel as the court first considers preliminary objections challenging the suit before addressing the substantive dispute over the administration.

Glee Hotel had asked the court to suspend the administration and restrain the administrator from exercising powers under the Insolvency Act, arguing that allowing the process to continue would render its challenge meaningless.

Appearing for the hotel, lawyer Emmanuel Mumia argued that the administration had begun damaging the hotel’s commercial standing, saying publicity surrounding the takeover had prompted key clients to reconsider their business with the establishment.

“We have demonstrated in the supporting affidavit and attached material as to how the hotel is negatively affected commercially, even by a mere storyline in the media,” he told the court.

He said allowing the administration to continue before the application was heard would leave nothing for the court to determine because the administrator would already have assumed full control: “They will take over the hotel. They will withdraw funds for whatever purpose because they have the power to do so. They will fire or hire staff.”

Mr Mumia further told the court that longstanding institutional clients had already begun exiting business relations with the hotel.

“We had to do letters to ChildFund to stay. We have attached evidence of the communication we had with the World Bank for them to stay and continue supporting the applicant in the form of its hospitality functions,” he told the court.

He maintained the hotel was not disputing its debt and offered to deposit Sh400 million with Equity Bank as security while the case proceeds. The lawyer added that the applicant was committed to clearing the debt by November 30.

Asked by the court how much remained outstanding according to the hotel, Mr Mumia said the figure was Sh7.75 billion, reflecting a consent settlement reached earlier this year.
But Equity Bank disputed that figure, arguing the debt had ballooned to Sh9 billion as of July 3 and termed the proposed deposit “a drop in the ocean.”

Senior Counsel Kiragu Kimani, appearing for the bank, urged the court to reject the interim application, arguing that it sought substantive relief during a mention of the case scheduled only for directions.

He also said jurisdiction had been challenged through preliminary objections, requiring the court to determine those issues before considering any other application.

The judge directed the parties to file submissions on the preliminary objections and fixed July 23 for a ruling on those objections before issuing further directions on the main application.

The bank further argued that the hotel had failed to honour a consent judgment that gave it time to settle the debt and that there was no evidence the administrator had mismanaged the business since assuming office.

In its ruling, the court agreed there was no material before the court showing disruption caused by the administrator.

“I have not been provided with specific evidence of the disruption that has so far been created by the administrator as of now since taking over the running of the company,” the court said.

“The apprehension that the administrator could therefore run down the business is at this point unsubstantiated.”

The legal dispute stems from a February consent under which Equity agreed to accept Sh7.75 billion in full settlement of borrowings owed by Ms Mungai and related entities if payment was made within agreed timelines through refinancing.

After the settlement failed and an earlier court reprieve expired, Equity appointed an administrator over Glee Hotel effective July 6.